Annual Report 1999 (For year ended March 31,1999)

Business Review

 
Marine Transportation
Container Business

 

Operating revenues from containership services for the term
under review amounted to ¥180,455 million (US$1,497 million), up 4.6%.
  
Container Business
As of March 1999, "K" Line's worldwide containership services included six loops on the trans-Pacific routes, three loops on the Asia/Europe routes, and two loops on the trans-Atlantic routes in cooperation with Yangming Marine Transport Corporation of Taiwan, and China Ocean Shipping (Group) Company (COSCO) of China. On the trans-Pacific routes, cargo volume increased on eastbound trade routes against the backdrop of favorable business conditions, with freight rates restored. In westbound trade, however, cargo movement to Asian countries from the United States decreased, with freight rates declining sharply. Consequently, differences in cargo volume between eastbound and westbound trade routes widened, leading to empty container re-positioning and higher operating costs.
       Cargo movement on the European route from Asian countries was steady, and freight rates recovered. Timely replacement of containerships with larger vessels and the addition of a new port of call in Egypt allowed the Company to increase its liftings.
       On the other hand, the European route to Asian countries suffered a substantial decline in cargo movement, similar to the westbound trans-Pacific routes, with freight rates also falling sharply.
       On the trans-Atlantic routes, cargo volume increased thanks to route rearrangements. Freight rates, however, declined due to intensified competition, which was attributable to the entry of new competitors. On the intra-Asian trade routes, cargo movement remained sluggish, adversely affected by Japan's prolonged recession and the economic turmoil in southeast Asia from 1997, which forced many companies to implement business rehabilitation. "K" Line managed to minimize the unfavorable effects through timely integration of the Japan/Philippines & Straits and the Japan/West Australia routes.
       Although we made vigorous efforts to improve profitability on each route through streamlining and the development of new markets, the overall performance of our containership business did not reach the level of the previous year, principally due to a decline in cargo movement to Asian countries and lower freight rates on this cargo.
  
Recent Developments
* In November 1998 "K" Line launched a new service on the Japan-Europe route, with eight containerships (3,500-4,000-TEU type) and a 56-day turnaround. The new service calls at Port Said in Egypt, where feeder services to and from East Mediterranean ports are provided.
* In October 1998 we upgraded our weekly service on the trans-Atlantic routes to twice a week, adding another loop with five 2,000-TEU containerships, one loop with four vessels covering North Atlantic ports and another with five vessels covering South Atlantic and Gulf ports.